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Monday, April 29, 2013

Is the Chained CPI the Right Fix for Social Security?

One of the most controversial elements of President Obama’s 2014 budget
is the proposal to reduce future cost-of-living adjustments to Social
Security benefits by changing the inflation index. The Social Security
Administration now bases inflation adjustments to on the consumer price
index for urban wage earners and clerical workers (CPI-W), a close
cousin of the more widely publicized CPI for all urban consumers
(CPI-U). The administration proposal would instead use a relatively new
index called the chained CPI, or C-CPI-U, which, in the past, has
increased slightly less rapidly. Predictably, deficit hawks love the
idea, while seniors and those who defend their interests hate it.
Suppose, though, that we set ideology and interest group politics aside
to look at the underlying economics of the issue. On those terms, is the
switch to the chained CPI the right fix for Social Security? >>>Read more

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